et quelques difficultés...
SYDNEY (Dow Jones)--Stymied by China and Indonesia's refusal to grant foreign operator permits, the Asian low cost offshoot of Australia's Qantas Airways Ltd. (QAN.AU) may have to sub-lease half of its Airbus A320 fleet.
Since beginning operations last December, Jetstar Asia, which is 49% owned by Qantas, is flying from its Singapore base to Hong Kong, Bangkok and Taipei but hasn't cracked the large Indonesian and Chinese markets.
"It is possible Jetstar Asia will look to lease out some of the aircraft it has ordered, later in the year," a Qantas spokesman said Thursday, citing the difficulty in adding destinations.
The airline has four A320s and another four are due for delivery during 2005.
Although Singapore has given Jetstar Asia rights to fly to many destinations, the carrier also needs to get landing rights from those countries, a process which is putting the ambitions of Qantas to tap into Asia's burgeoning aviation market into a tailspin.
After initially investing S$50 million to start the venture in partnership with Singapore's state-owned investment arm Temasek Holdings and businessmen Tony Chew and F.F. Wong, Qantas may have to scale back its ambition for JetStar Asia to have a fleet of more than 20 planes within three years.
According to the Sydney-based Center for Asia Pacific Aviation, Indonesia has refused Jetstar Asia an operator's permit because Singapore has no more air rights capacity left under its bilateral air services agreement.
Locally, the media has speculated the Chinese government wasn't impressed by Jetstar Asia's decision to begin services to Taiwan's capital Taipei before finalizing negotiations for landing rights with Beijing.
But Qantas, which regards its investment in Jetstar as modest, is confident the carrier will continue to add services to other Asian destinations.
Jetstar has rights to fly to Manila and has applied for a foreign operator's permit.
"In the Philippines that process is well advanced and they expect to hear a result soon," the Qantas spokesman said.
Jetstar has also applied for a foreign operator's permit for India.
On top of its difficulties with Indonesia and China, the carrier is facing stiff competition from low cost rivals including Malaysia's Air Asia, Valueair, and Tiger Airways, which is backed by aviation heavyweight Singapore Airlines Ltd. (S55.SG).
First half results from Qantas in February revealed it made a loss of A$9.7 million from its interest in the discount Asian carrier in its first month of operation.
Jetstar pulled out of the Singapore to Pattaya, Thailand route earlier this month, diverting the services to Bangkok. The airline had just started flying to Pattaya when the Asian tsunami hit coastal Thailand on Dec. 26.